Breaking Monetary Policy News: The Role of Mass Media Coverage of ECB Announcements for Public Inflation Expectations

61 Pages Posted: 23 Feb 2023

See all articles by Patrick Hirsch

Patrick Hirsch

Walter Eucken Institute; University of Freiburg

Lars P. Feld

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences; CESifo (Center for Economic Studies and Ifo Institute)

Ekkehard A. Koehler

University of Siegen - Department of Economics; University of Freiburg - College of Economics and Behavioral Sciences; Walter Eucken Institute

Multiple version iconThere are 3 versions of this paper

Date Written: 2023

Abstract

Using the variation in national television news of four major member states in the Eurozone, we find causal effects of coverage of high-frequency identified monetary policy announcements on households’ inflation expectations in an event study and a generalized Difference-in-Differences approach with stacked data. If a monetary policy decision receives news coverage, the adaptation of inflation expectations is stronger than without coverage. Second, we find that coverage of ‘delphic’ monetary policy announcements, which are primarily informational in nature, leads to an inverse adjustment, i.e., expansionary shocks lead to households lowering their inflation expectations, as opposed to coverage of a textbook, ‘odyssean’, monetary policy shock.

Keywords: inflation expectations, media coverage, transmission of monetary policy, quasi-experimental evidence

JEL Classification: E310, E520, E580, C830, D840

Suggested Citation

Hirsch, Patrick and Feld, Lars P. and Koehler, Ekkehard A., Breaking Monetary Policy News: The Role of Mass Media Coverage of ECB Announcements for Public Inflation Expectations (2023). CESifo Working Paper No. 10285, Available at SSRN: https://ssrn.com/abstract=4368214 or http://dx.doi.org/10.2139/ssrn.4368214

Patrick Hirsch (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

University of Freiburg ( email )

Fahnenbergplatz
Freiburg, D-79085
Germany

Lars P. Feld

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Ekkehard A. Koehler

University of Siegen - Department of Economics ( email )

Department of Economics
Hoelderlinstr. 3
Siegen, 57068
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg, 79100
Germany

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